Jumeirah hotels group studies Saudi expansion

Jumeirah Hotels and Resorts manages Madinat Jumeirah, foreground, and the Burj Al Arab in Dubai.

Dubai-based Jumeirah Hotels & Resorts is planning to expand into Saudi Arabia, said the executive chairman, Gerald Lawless. The luxury hotel management company, which is part of Dubai Holding, has "a number of leads and negotiations going on right now in Saudi", Mr Lawless said. "Saudi Arabia is very important for us. I certainly believe very strongly in Saudi Arabia as having great potential for corporate travel and for leisure travel, and of course you have religious tourism, which is a major factor as well."

Analysts have highlighted Saudi Arabia as an important market for hoteliers and hotel investors. "The Saudi market is one of the less hit by the crisis because of the financing model and Sharia-compliant way of doing finance and business," said Amine Hamdani, vice president of CBRE Hotels Middle East. "There is still tremendous liquidity; the economy is still doing very well. "The country is opening more and more economically, socially and culturally to foreigners. The Government is taking some serious steps to open more culturally and socially, and more tourists will come for other reasons than business, so it's really a country where there is huge opportunity."

Jumeirah Group, which manages the iconic Burj al Arab in Dubai, has already signed agreements for hotels in Bahrain, Oman, Qatar, Kuwait and Jordan. In Abu Dhabi, Jumeirah has a 66-storey luxury beachfront hotel, Jumeirah Etihad Towers, under development. "We will continue to look at whatever might come up in Abu Dhabi - the dynamism of Abu Dhabi and the way it is developing at the moment is obviously very exciting and very interesting for us," Mr Lawless said.

Mr Hamdani agreed that there were good opportunities in the capital: "For Abu Dhabi we are very positive. There is a strong shortage [of hotel rooms] and we need much more supply." In addition, Jumeirah Group is also pushing ahead with its extensive international expansion plans. Among its signed agreements, the company is set to manage hotels in locations as far-ranging as the US Virgin Islands, the Maldives and Mallorca.

Jumeirah Group is also in negotiations to manage more hotels in China and Mr Lawless said its Shanghai hotel, which was originally scheduled to open in December 2008, was now likely to be opened in December 2009 or January 2010. "I'm extremely confident that we will achieve the [international] target of 60 hotels either in operation or under development by 2012," Mr Lawless said. "We are well on target to achieve that at the moment in terms of the number of management agreements, which is almost 25 at this stage."

He said that following preliminary negotiations with investors, Jumeirah Group had 35 letters of understanding, which were being negotiated towards management agreements. Mr Lawless said he estimated that once these plans were completed, approximately 35 per cent of Jumeirah's hotels would be in the Middle East. He remained confident that the numbers of tourists visiting Dubai would continue to grow, and said there was still room for more hotels in the emirate.

He explained that continued promotion of the destination was needed to minimise the effects the of the global downturn over the coming months, both in existing markets and new markets such as China. Overall occupancy rates in Dubai fell to 75.5 per cent in February 2009 from 89.1 per cent in the same month the previous year, according to data from STR Global. Revenue per available room meanwhile has slumped to $213.77 from $326.57 over the same period.

"In our company, we were looking at forward projections in December for February and March and it was looking like we could go as low as 55 per cent occupancy, which hasn't happened for years," he said. "In the event, we actually achieved 90 per cent, 93 per cent in March and about the same that is coming through in April for our beach hotels. "A lot of this has been driven by the success of the various campaigns. The real secret of the success is the cooperation of all the vested interests within the city, from the hotels to Emirates Airline and the tourism department who coordinated all of that and put some money behind the promotions."